Ethereum: Crypto market rejects Shanghai update

After Bitcoin, Ethereum is considered to be the second largest crypto currency in the world. Its network makes it possible to create decentralized applications (dApps) and smart contracts, today seen as the heart of decentralized finance. To improve its operation, Ethereum launched its Shanghai update in April 2023. Unfortunately, the latter did not have the expected effect on the activity of the crypto network.

What is the Ethereum Shanghai Update?

The Shanghai Upgrade is part of Ethereum’s evolution plan. It allowed the crypto network to move from a consensus system based on proof of work to a system based on proof of stake. But not only ! This change should also allow Ethereum to:

• gain in efficiency, security and scalability (its ability to process a large number of crypto transactions).
• making crypto transaction fees more predictable and affordable through new gas pricing mechanism.

What are the results of the Shanghai update?

According to a report from JPMorgan, the Shanghai update failed to boost activity on the Ethereum crypto network. THE number of daily crypto transactions reportedly dropped by 10% since the launch of the update, going from 1.3 million to 1.2 million. Crypto trading volume also decreased by 20%, from $18 billion to $14 billion.

What are the explanations and prospects for Ethereum?

Several factors could explain why the Shanghai update failed.

• On the one hand, the update’s low impact on crypto transaction fees could have disappointed Ethereum users. They remain high and volatile.
• On the other hand, Ethereum investors could be attracted to other more innovative and successful cryptocurrencies.

To revive itself, Ethereum will need to successfully complete the next stage of its evolution plan: Ethereum Improvement Proposal (EIP)-4844 or Protodanksharding. The network will have to be ready to take on this technological challenge and convince its crypto investors.